Is the End Near for the Postal Service?

October 13, 2011

The United States Postal Service (USPS) stands on the brink of financial collapse. The looming financial collapse of one of the largest employers in the world is not news, but is a trend that has been building over time. As early as 1992, the Government Accounting Office raised concerns about the ability of USPS to continue to compete as more and more consumers migrated to electronic forms of communication. Nearly 20 years later, the loss in mail traffic has caused startling results for the industry, says James Gattuso, a senior research fellow at the Heritage Foundation.

A 2010 study by the Boston Consulting Group suggests that mail volume will decline an additional 15 percent by 2020, causing annual losses of $15 billion.

Congress will be forced to act if it wants to save the USPS, but reforms of the postal system have rarely gone smoothly. In order to jumpstart this process, the USPS itself proposed several needed changes in order to restructure and become financially viable again.

First, it wants to reduce its workforce by 220,000 jobs down to 425,000 -- a move that is currently prohibited by the USPS' contracts with its labor unions.

Second, it has suggested reducing its retail facilities from 32,000 to 20,000 and processing plants from 500 to 200 by 2015 in response to technological advancements that make their maintenance unnecessary.

Third and finally, they want to discontinue Saturday mail, as this will save $2 billion to $3 billion per year.

It is clear that the status quo will prove deadly to the USPS if reform does not occur.

Source: James Gattuso, "You've Got (No) Mail: Is the End Near for the Postal Service?" Heritage Foundation, September 29, 2011.